BH - Biglari Holdings

[Kraven]

Last year in Omaha I found myself standing next to him at a bar.  He looked like he could have stepped right out of the pages of GQ.  His hair was perfectly coiffed and from the distance I could hear Fleckenstein howling with jealousy.  Warren Zevon would have approved.

[rranjan]

Bilgari and having integrity? I guess you have different scale of integrity then.

 

The moral high horse you are riding on is blind to reason.

 

Best,

Ragu

 

Most people will find it very difficult to say that Bilgari is man with high integrity. He has changed rules of the game in middle so many times for only one reason. All evidence points to contrary.

[ragu]

All evidence points to contrary.

 

Hmm. I asked a couple of questions on another thread that hasn't elicited a response.

 

Those aren't hard questions by any stretch of the imagination, but the answers-and their implications-might be pretty uncomfortable to face up to if you are a Sardar detractor. I'd be happy for you (or anyone else) to give those questions a go and see where that gets you.

 

Best,

Ragu

[Parsad]

All evidence points to contrary.

 

Hmm. I asked a couple of questions on another thread that hasn't elicited a response.

 

Those aren't hard questions by any stretch of the imagination, but the answers-and their implications-might be pretty uncomfortable to face up to if you are a Sardar detractor. I'd be happy for you (or anyone else) to give those questions a go and see where that gets you.

 

Best,

Ragu

 

mpauls,

 

Couple of things that should provide some food for thought to you (and the other detractors):

 

1. Which set of investors have been with Sardar the longest?

2. How have they responded to the incentive agreement and Sardar's subsequent actions?

 

Best,

Ragu

 

Why don't you let me give it a shot:

 

1.  I received numerous calls from a subset of that set of investors when those issues came to light...they were distressed and upset.  I also received calls from SNS shareholders...both individual and institutional.  I also turned away requests from the media on the subject, as we do not speak to the media...but I certainly could have.  Many investors have made money with him over the years...people are willing to overlook many flaws when they are making money.  Hands down, I would much prefer to be aligned with Berkshire Hathaway, Fairfax Financial, Markel and Leucadia.  He has even told you guys that they are not the next Berkshire Hathaway...he will make money, but not how many will perceive to be the "right" way.

 

2.  Some have sold.  Several of the closest allies to Sardar have left, including those that helped him take over Western Sizzlin and Steak'n Shake.  I was one of his biggest proponents at one time, if the archive here does not indicate that!  We were also the only people who sent a letter to the board when the name change was initiated.  Again, people are willing to overlook errors in judgment when they are making money.  We weren't willing to do so!  We sold half our stake then, and we sold the other half after the compensation agreement was announced.  I had a two hour conversation with Sardar and Phil in Omaha that weekend at their initiation...not unlike Onyx1.  I tried to talk them out of it to no avail, to even raise the hurdle or lower the incentive as they had an advantage with captive capital.  They would not listen.  We sold our shares the next week after they had gone up 4 times in a year and a half.  We've made more money for our partners by selling BH, than we would have made by holding it since.  And I don't lose any sleep as we did what was ethical, and fought for a fair compensation plan for all shareholders.  Your CEO didn't listen and he's not going to!  As long as you understand that, it doesn't matter what any of us say and you are comfortable with that. 

 

Sardar will make money over time...lots!  He will undoubtedly be rich.  The question is, upon whose back is he going to make his fortune on?  Again, there is nothing wrong with what he is doing...he just wants to make money.  But so does Kim Kardashian!  Cheers!

[bookie71]

Parsad,

Well put!

[ragu]

1.  I received numerous calls from a subset of that set of investors when those issues came to light...they were distressed and upset.

 

If you are talking about the LP's in the Lion Fund, then it must have been a very small subset indeed, seeing as the overwhelming majority have stayed on. In fact, by staying on, they are paying more than they were paying before by virtue of the Lion Fund's ownership of BH stock.

 

The problem here was that Sardar didn't have a meaningful ownership stake in BH. He said as much at last year's AM. They tried addressing it though this arrangement. You can argue all day long about the mechanics, but the intent wasn't to advantage Sardar over shareholders. In the fullness of time, I expect you'll see that the present value of the cash flows from the Lion Fund to BH will outweigh the present value of the compensation payments to Sardar.

 

The outcome with respect to the incentive agreement is so clear that I'll make a wager with you (and anyone else that's interested, up to a maximum of 3 individual wagers):

 

The incentive agreement will no longer be in force on or before the date of the 2021 Annual Meeting (10 full years since it was first approved).

At stake will be a share of BH (or cash equivalent to market value on the date the wager is considered ended). The winner gets to pick the charity that the proceeds will go to. Sound alright?

 

Best,

Ragu

 

 

 

[Parsad]

1.  I received numerous calls from a subset of that set of investors when those issues came to light...they were distressed and upset.

 

If you are talking about the LP's in the Lion Fund, then it must have been a very small subset indeed, seeing as the overwhelming majority have stayed on. In fact, by staying on, they are paying more than they were paying before by virtue of the Lion Fund's ownership of BH stock.

 

The problem here was that Sardar didn't have a meaningful ownership stake in BH. He said as much at last year's AM. They tried addressing it though this arrangement. You can argue all day long about the mechanics, but the intent wasn't to advantage Sardar over shareholders. In the fullness of time, I expect you'll see that the present value of the cash flows from the Lion Fund to BH will outweigh the present value of the compensation payments to Sardar.

 

The outcome with respect to the incentive agreement is so clear that I'll make a wager with you (and anyone else that's interested, up to a maximum of 3 individual wagers):

 

The incentive agreement will no longer be in force on or before the date of the 2021 Annual Meeting (10 full years since it was first approved).

At stake will be a share of BH (or cash equivalent to market value on the date the wager is considered ended). The winner gets to pick the charity that the proceeds will go to. Sound alright?

 

Best,

Ragu

 

Why would I bet you, when I've said all along that the incentive agreement won't be in place in the future.  Once he has the votes or enough control, the cap and the incentive agreement will disappear.  He put the incentive agreement in place, because he felt that if Steak'n Shake had gone down, he would have lost everything after years of work, because he had bet it all on SNS.  He decided then he was going to worry about number one...himself! 

 

As for those partners who have not left, they should ask themselves what would have happened if the SNS experience was repeated and he lost that bet!  Think Ackman with Target, Herbalife or JC Penny.  This guy loves leverage and letting the dice roll.  Unfortunately, one day you will learn the hard way.  Cheers! 

[ragu]

Why would I bet you, when I've said all along that the incentive agreement won't be in place in the future.

 

Like you did in this post, eh?

 

First line from that post:

 

What?!    Why would he terminate the incentive agreement at any point?

 

Best,

Ragu

[Parsad]

Why would I bet you, when I've said all along that the incentive agreement won't be in place in the future.

 

Like you did in this post, eh?

 

First line from that post:

 

What?!    Why would he terminate the incentive agreement at any point?

 

Best,

Ragu

 

You read the whole post above...right?

 

Why would I bet you, when I've said all along that the incentive agreement won't be in place in the future.  Once he has the votes or enough control, the cap and the incentive agreement will disappear.

 

He won't remove the incentive agreement or cap until he has control.  That's what was meant by that previous post you linked.  He will keep them in place until he doesn't need them anymore, and he won't remove them as he will own more and more of the company over time.  But it's your investment...do what you want!  Cheers!

[rranjan]

 

The problem here was that Sardar didn't have a meaningful ownership stake in BH. He said as much at last year's AM. They tried addressing it though this arrangement. You can argue all day long about the mechanics, but the intent wasn't to advantage Sardar over shareholders.

 

That problem should be fixed by him earning and then buying shares, simple as that. You don't take away shareholder's money to fix such personal problems of CEO. You can also make a case of transferring 50% of company to him immediately at expense of shareholders because that solves this problem even quicker. What he says is not worth anything because his actions have been lot different than what he said few years ago.

 

There is no need to argue all day for this. For me action speaks louder than words. Based on Bilgari actions, I will have hard time to keep a straight face while stating that he is a man with high integrity. If you think that he is a man with high integrity , then good luck to you. Hopefully you make lot of money but watch out for your wallet.

 

We just need to agree to disagree and move on.

[wescobrk]

That's another interesting way to make a lot of money, the problem is it would be off shareholders.

It has been hinted the 10 million cap will be removed in the future (it was originally proposed for unlimited of course) if he can buy stock for 8 years at depressed prices because 1/4th of the cash flows are diverted to him and then remove the cap the stock would definitely skyrocket.

 

I don't have an opinion either way what will happen but that is definitely a way for him to make a ton of money.

 

So far the lion fund (without Bh) has 50 million the past 3 years and if he is earning 15-20% on that 50 million he is forgoing about 1.5 million a year from the lion fund. That's a big gap from 10 million or higher once the cap is removed. I'm not sure the present value argument of what he gave up and what has accreted to Bh shareholders is valid, at least so far.

 

On a completely different topic, he's definitely done a great job with cracker barrel so far.

[ragu]

Once he has the votes or enough control, the cap and the incentive agreement will disappear.

 

I can only presume that you mean that the cap will go away once he has enough votes and the incentive agreement will disappear once he has enough control . However, that wasn't your stance in the post that I linked to.

 

You said (and the quotes are below) that he wouldn't terminate the agreement at any point and that he will remove the cap once he has enough votes for it to pass.

 

What?!    Why would he terminate the incentive agreement at any point?

 

The $10m cap right now keeps Sardar from getting more and more of the company, but once he has enough votes, do you think he will really retain the cap after the behavior he has shown in the past already?  Greed and power know no bounds!

 

You really haven't said "all along" that the incentive agreement would disappear. If you think now that the incentive agreement won't last forever, then it represents a change in your stance.

 

I only proposed the wager because I knew you'd been incredulous when I'd suggested that the incentive agreement would be terminated at some point in the future. My last word in this matter.

 

Best,

Ragu

[Parsad]

Once he has the votes or enough control, the cap and the incentive agreement will disappear.

 

I can only presume that you mean that the cap will go away once he has enough votes and the incentive agreement will disappear once he has enough control . However, that wasn't your stance in the post that I linked to.

 

You said (and the quotes are below) that he wouldn't terminate the agreement at any point and that he will remove the cap once he has enough votes for it to pass.

 

What?!    Why would he terminate the incentive agreement at any point?

 

The $10m cap right now keeps Sardar from getting more and more of the company, but once he has enough votes, do you think he will really retain the cap after the behavior he has shown in the past already?  Greed and power know no bounds!

 

You really haven't said "all along" that the incentive agreement would disappear. If you think now that the incentive agreement won't last forever, then it represents a change in your stance.

 

I only proposed the wager because I knew you'd been incredulous when I'd suggested that the incentive agreement would be terminated at some point in the future. My last word in this matter.

 

Best,

Ragu

 

Think what you like.  Are you seeking approval from the board...if so, you are barking up the wrong tree.  I'll simplify and qualify exactly what I want to say on this matter once and for all:

 

Many actions in the last few years, from the name change, salary changes, incentive agreement, eventual cap on the compensation, dual class structure, restructuring of the board and licensing of the name have been to achieve one thing...greater control of the company.  Some occurred right away, and some issues were put on the back burner because he could not get approval from shareholders. 

 

Your objectivity on the matter is skewed because you REALLY want to believe that this person will not screw you over, yet so many of the above actions indicate that you are either with the CEO or you are perceived to be against him.  Yet the CEO is the employee of the shareholders! 

 

And this is the distinction you are missing here between this CEO and others who like Buffett, Prem, the Markels, Patrick Byrne and many others, are there to SERVE the shareholders!  A very marked distinction that breeds loyalty, trust and mutual respect between the executives and the true OWNERS of the business! 

 

It's something I take very seriously with the partners in my funds.  I would much rather I come out on the wrong end and lose everything, while my partners gain everything, than to lose an ounce of reputation with our partners or change the game on them at various points.  We don't do that...money isn't that important to me or Alnesh!  You cannot make people respect you...you have to earn it!  And you breed the wrong type of respect if you think it comes from just "making some damn money".  Cheers!

[giofranchi]

The outcome with respect to the incentive agreement is so clear that I'll make a wager with you (and anyone else that's interested, up to a maximum of 3 individual wagers):

 

The incentive agreement will no longer be in force on or before the date of the 2021 Annual Meeting (10 full years since it was first approved).

At stake will be a share of BH (or cash equivalent to market value on the date the wager is considered ended). The winner gets to pick the charity that the proceeds will go to. Sound alright?

 

Best,

Ragu

 

Well, you certainly cannot say that ragu lacks the conviction of his ideas!!  ;D ;D

 

As far as I am concerned, I tend to just stick to the process. Because I don’t believe in devils as much as I don’t believe in angels. Good businessmen just understand that to create truly lasting wealth the only way is to make their business grow and thrive. Cheating all your life simply is the riskiest of policies!! And, believe me, in Italy we are the masters of cheating… yet, I do not personally know of a single case that at the end wasn’t reached by disappointment and failure…

 

So, in my experience the only ones who go on cheating are those forced to do so, because they lack a good process.

 

Mr. Biglari is clearly not the case. On the contrary, I like how he conducts his business very much. And to those who go on repeating he uses a lot of leverage, I go on answering that I disagree: he just concentrates BH capital on a few ideas he understands very well, like any entrepreneur does! Ok, he will never be a widely diversified trader, but to be a widely diversified trader is not the only way to financial success… like many great entrepreneurs have shown throughout history.

Moreover, as BH grows, also the number of businesses it controls will. That way automatically increasing diversification. ;)

 

giofranchi

[premfan]

Can this thread be closed? Its like in the movie groundhog's day with bill murray where he relives the same day over and over again. Every post is essentially saying the same thing.  I think we all can agree to disagree and focus on making some damn money!

[shalab]

I think it is very educational - Ragu, if you don't mind can you share what percentage of your portfolio is in BH.

[GrizzlyRock]

I agree with premfan - this thread is dead.

 

Most guys dislike BH and some like BH. Either Sardar blows up or doesn't and he either screws minority shareholders or not. 

 

Peace out.

[bookie71]

I agree with premfan - this thread is dead.

 

Most guys dislike BH and some like BH. Either Sardar blows up or doesn't and he either screws minority shareholders or not. 

 

Peace out.

Yep and most of his distractors were supporters early on.

[Kraven]

People, people.  Please can we have some civility here.  A story might be of assistance.  A number of years ago I found myself at a Matzo Ball Christmas Eve Event at the old Palladium in NYC.  For those not in the Tribe, these events were essentially big parties for Jews who didn't want to feel left out on Christmas Eve and felt like just eating Chinese food and going to the movies wasn't enough.  There was a mixer aspect to it as well. 

 

Anyway, the Palladium was a massive club.  Thousands were there which I know is surprising for NYC.  After a long night of festivities and answering the question "Doctor?  lawyer?  banker?" from the fairer sex, I found myself in the coat room.  For such a large club, the coat room was surprisingly small.  It became very crowded and people started to push and some small fights broke out.  Although these were of the slap and push variety, it was still terrifying.  From the back of the room, over the din of the crowd, a lone voice of reason could be heard.  It said, "People, please stop.  We're all Jews here!"  And you know what?  Nothing really stopped, but still it was helpful.

 

So I say to you, people, please stop, we're all value investors here. 

[infinitee00]

People, people.  Please can we have some civility here.  A story might be of assistance.  A number of years ago I found myself at a Matzo Ball Christmas Eve Event at the old Palladium in NYC.  For those not in the Tribe, these events were essentially big parties for Jews who didn't want to feel left out on Christmas Eve and felt like just eating Chinese food and going to the movies wasn't enough.  There was a mixer aspect to it as well. 

 

Anyway, the Palladium was a massive club.  Thousands were there which I know is surprising for NYC.  After a long night of festivities and answering the question "Doctor?  lawyer?  banker?" from the fairer sex, I found myself in the coat room.  For such a large club, the coat room was surprisingly small.  It became very crowded and people started to push and some small fights broke out.  Although these were of the slap and push variety, it was still terrifying.  From the back of the room, over the din of the crowd, a lone voice of reason could be heard.  It said, "People, please stop.  We're all Jews here!"  And you know what?  Nothing really stopped, but still it was helpful.

 

So I say to you, people, please stop, we're all value investors here.

 

LOL ! Nice one Kraven. Enjoyed it especially after the cat fight above ;-D

[ragu]

I think it is very educational - Ragu, if you don't mind can you share what percentage of your portfolio is in BH.

 

shalab,

 

Don't mind at all. BH is 71.5% of my portfolio based on latest market values. One of 2 current positions.

 

Best,

Ragu

[twacowfca]

People, people.  Please can we have some civility here.  A story might be of assistance.  A number of years ago I found myself at a Matzo Ball Christmas Eve Event at the old Palladium in NYC.  For those not in the Tribe, these events were essentially big parties for Jews who didn't want to feel left out on Christmas Eve and felt like just eating Chinese food and going to the movies wasn't enough.  There was a mixer aspect to it as well. 

 

Anyway, the Palladium was a massive club.  Thousands were there which I know is surprising for NYC.  After a long night of festivities and answering the question "Doctor?  lawyer?  banker?" from the fairer sex, I found myself in the coat room.  For such a large club, the coat room was surprisingly small.  It became very crowded and people started to push and some small fights broke out.  Although these were of the slap and push variety, it was still terrifying.  From the back of the room, over the din of the crowd, a lone voice of reason could be heard.  It said, "People, please stop.  We're all Jews here!"  And you know what?  Nothing really stopped, but still it was helpful.

 

So I say to you, people, please stop, we're all value investors here.

 

Good advice, and as one of your inlaws from a related tribe, I will pray for Mr. Biglari that Giofranchi's vision for him will come to pass.  :)

[Kraven]

People, people.  Please can we have some civility here.  A story might be of assistance.  A number of years ago I found myself at a Matzo Ball Christmas Eve Event at the old Palladium in NYC.  For those not in the Tribe, these events were essentially big parties for Jews who didn't want to feel left out on Christmas Eve and felt like just eating Chinese food and going to the movies wasn't enough.  There was a mixer aspect to it as well. 

 

Anyway, the Palladium was a massive club.  Thousands were there which I know is surprising for NYC.  After a long night of festivities and answering the question "Doctor?  lawyer?  banker?" from the fairer sex, I found myself in the coat room.  For such a large club, the coat room was surprisingly small.  It became very crowded and people started to push and some small fights broke out.  Although these were of the slap and push variety, it was still terrifying.  From the back of the room, over the din of the crowd, a lone voice of reason could be heard.  It said, "People, please stop.  We're all Jews here!"  And you know what?  Nothing really stopped, but still it was helpful.

 

So I say to you, people, please stop, we're all value investors here.

 

LOL ! Nice one Kraven. Enjoyed it especially after the cat fight above ;-D

 

I'm just truly hoping this doesn't turn into the coat room at the Palladium all over again.

[onyx1]

I will pray for Mr. Biglari that Giofranchi's vision for him will come to pass.  :)

+1 

 

I won't hurt me a bit to see BH thrive.  So in the spirit of Vilfredo Pareto, I hope the BH dreams of Giofranchi, Ragu, and all other boardmember longs come true! 

 

P.S.  LOL @ Kraven story!

[bookie71]

fyi

http://seekingalpha.com/news-article/6589521-biglari-holdings-inc-news-release?source=email_portfolio&ifp=0